Corpus ID: 16552673

Endogenously Chosen Boards of Directors and Their Monitoring of the CEO

  title={Endogenously Chosen Boards of Directors and Their Monitoring of the CEO},
  author={Benjamin E. Hermalin and M. Weisbach},
  journal={The American Economic Review},
  • Benjamin E. Hermalin, M. Weisbach
  • Published 1996
  • Business, Economics
  • The American Economic Review
  • How can boards be chosen through a process partially controlled by the CEO, yet, in many instances, still be effective monitors of him? The authors offer an answer based on a model in which board effectiveness is a function of its independence. This, in turn, is a function of negotiations (implicit or explicit) between existing directors and the CEO over who will fill vacancies on the board. The CEO'S bargaining power over the board-selection process comes from his perceived ability relative to… CONTINUE READING
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